Fix and Flip Private Loan - Panhandle FL

[Edwin Epperson]

Investment Info:

Single-family residence private money loan investment in Fort Walton Beach.

Purchase price: $83,200
Sale price: $220,000

Not every deal is a slam hit, a home run. This was one of those deals. We loaned 80% on the purchase of this property with an experienced investor but the first time we had worked with them. We also loaned 100% of the projected renovation which was supposed to be only $50K. There was an unaddressed foundation issue that resulted in an additional $40K worth of work. This caused the project to take 2 mo. longer and reduced profit to only $10K to the investor. Many lessons learned on this deal!

What made you interested in investing in this type of deal?

The experience of the investor, their team in the local market, such as RE Agents and contractors they had a good relationship with, as well their vision for where they wanted to grow their business. I pride myself on being a "Relational Lender" and I truly desire to help those investors who want to build a long-term relationship. They were willing to help make us comfortable as far as meeting my requirements, as well they had a good amount of liquidity after closing.

How did you find this deal and how did you negotiate it?

The investor found me through a local realtor who met me at an REI Club. I met with the investor over dinner and learned more about their business, their plans, and what they wanted to focus on. I expressed my concerns and they made sure they helped make this first deal of many, easy and smooth. The reason they decided to use me? No credit check, no Personal DTI requirements, as well the ability to close in a very short amount of time.

How did you finance this deal?

I financed this deal through my Turn-Key Private Lending solution. I had a few military buddies and family who were sitting on capital and wanted to invest in real estate but they did not have the Time, Knowledge, nor Experience to invest directly themselves. Taking the role of the bank seemed very attractive and with my one-and-done for you solution, they jumped on the opportunity to invest in a 1st position loan secured to an asset well undervalued.

How did you add value to the deal?

When the foundation issue happened we helped the investor identify a foundation remediation expert in the area, and offered additional funding to get the deal across the finish line. This is also where the borrower's liquidity came into play. Because they had liquidity they took care of the foundation issue without any problem and we wrapped up the project a little over timeline but still with a profit.

What was the outcome?

The borrower was able to sell the property in 9 months. It took three months longer than expected due to the foundation issue. Yet because the market was on an upswing, the investor did walk away with some profit, as well all their original investment back.

Lessons learned? Challenges?

This project put into place a reminder for me to have the property inspected. Now I always conduct a property inspection through a 3rd party service provider. They conduct what's called a feasibility study and measure the scope of work to the needs of the property and ensure two issues are addressed. #1 Are all issues of the property addressed in the scope of work? #2 Can the proposed renovation be completed on the current budget? This study has been a life saver more than once.